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TMI Blog2013 (1) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... . and CIT (A) for such adhoc 15% disallowance and the actions are based merely on suspicion and not on actual facts. 2. On the facts of the case the Ld. CIT (A) is not justified in confirming arbitrary disallowance of 10% out of the general expenses of ₹ 4,06,307/- claimed by appellant in profit loss account. 3. On the facts of the case the Ld. CIT (A) is not justified in confirming arbitrary disallowance of 10% of the Motor car expenses on account of personal use for the motor car expenditure of ₹ 4,51,292/- (including Depreciation) incurred by the appellant. The Ld. CIT(A) and AO failed to appreciate the fact that said expenditure is covered under Fringe Benefit Tax and the taxation on account of such personal use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entories report placed on record arrived at shortage of stock. This was explained by assessee as process loss. AO while accepting that there is process loss, however, restricted to 20% of the difference so arrived at by him. The learned CIT (A) while directing the arithmetical mistakes committed by AO to be rectified, restricted the loss to 15% so arrived. Assessee is aggrieved on this in Ground No.1. Ground Nos. 2, 3 4 are with reference to the adhoc disallowances on various expenditure claimed and Ground No.5 is with reference to the disallowances under section 40(a)(ia) on the reason that the TDS was not made. These grounds are considered in this appeal. 3. We have heard the learned Counsel and the learned DR. 4. Ground No.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss has occurred due to processing to make the best quality as best. However, in the accounts he has not accounted for the material which remained after processing like scrap in case of individual units which is sold and accounted for. Even in these medicinal plants which has been exported by assessee, there has to be some scrap after processing. For example, in case of Neem Cake, even after processing, the refuse is a sellable produce which is used along with fodder to feed the animals. Similar position has to be in other items and hence the appellant cannot claim that after processing nothing remained as refuse which was to be sold. Even on this account the disallowance was required to be made out of the processing loss. In fact, in such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... best quality of the product is exported. It was further submitted that out of the turnover of ₹ 3.39 crores, the loss is only 3.39% which is very insignificant and low. Considering that AO who has scrutinized the assessments in earlier two assessment years has not made any such disallowance, we are of the opinion that no disallowance is called for on this estimated the loss by AO. Ground No 1 is allowed. AO is directed to delete the addition so made. 7. Ground No.2 pertain to disallowance of 10% of the general expenses. On the reason that assessee could not furnish complete details of the expenses, AO disallowed 20% of the expenses for want of proper supporting vouchers and details. Thus, an amount of ₹ 81,274 was disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inge benefit provided to the Partners/Employees, we do not see any reason to disallow 10% as personal expenditure. Following the principles laid down by the ITAT in the case of Hansraj Mathuradas vs. Income Tax Officer in ITA No.2397/Mum/2010 dated 16.09.2011 wherein on similar facts of the case, considering the Board Circular No.08/05 dated 20.08.2005, it was opined that once FBT was levied on expenses incurred, the same are treated as fringe benefit provided by assessee as employer to its employees and the same have to be allowed as expenses incurred wholly and exclusively incurred for the purpose of its business. As seen from the return of FBT filed, assessee not only considered the conveyance, repairs and running expenses, but also insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion further observing that the submissions made by assessee are contradictory in the sense that the ledger account was showing consultancy charges paid to Mr. Kushalchand and website job work against payment to Ms. Aparna. 11. The learned Counsel fairly admitted that they have no information on these two people whether they are qualified or not but the fact is that they have been paid only stipend for developing the website and Retainership for doing miscellaneous work in the office. Since assessee is not in a position to justify that these amounts are paid towards stipend/Retainership /salary, the presumption made by AO and the CIT (A) that they render professional service on the basis of ledger accounts has to be accepted. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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